Strategic Planning: OR to the Rescue

Abstract

A common application of linear programming is assisting with strategic planning decisions. In this paper we describe a linear programming model that was used by a large US corporation to assist with decisions concerning one of its major product lines. In addition to standard capacity and market demand constraints, this model incorporated constraints termed “complete buildings” (CB) constraints that were dictated by the Sales Department. Essentially, the CB constraints ensured that the model product production levels were, within a tolerance, all the same percentage of their market demand. When Sales, with the help of Accounting, proposed opening a second (then idle) heavy products mill in an effort to capture more of the heavy products market demand, the Sales Department's own CB constraints within the strategic planning linear programming model told a different story.